Audit of the Summit Management Office for the 2018 G7 Presidency

Final report

Global Affairs Canada
Office of the Chief Audit Executive

Tabling Date 
June 2019

Acronyms and symbols

ADM

Assistant Deputy Minister

CFO

Chief Financial Officer

FINSTAT report

Financial status report

G7

Group of 7

PFM

Strategic Policy Branch

PSPC

Public Services and Procurement Canada

SAP

Systems, Applications and Products

SMO

Summit Management Office

SMFP

Payment Services Division

Executive summary

On May 27, 2017, the Prime Minister announced that Canada would host the G7 Summit at La Malbaie, in the Charlevoix region of Québec. The G7 Presidency would be held from January 1 to December 31, 2018 and allow Canada to showcase its domestic and international priorities. As the G7 President, Canada was responsible, amongst other activities, for hosting and organizing the G7 Summit that took place on June 7 and 8, 2018.

Why it is important

Although not a global governance organization, the G7 provides leadership on global issues, and acts as a catalyst for international progress. The G7 Summit is held annually and is hosted by the countries on a rotational basis. Hosting the G7 Presidency is an important undertaking for Canada, which requires the co-operation and involvement of 15 federal departments and agencies, including Global Affairs Canada (as detailed in Appendix A).

The lead responsibility for planning, organizing and delivering the G7 Presidency rests with Global Affairs Canada, and it is under the leadership of the Deputy Minister for the G7 Summit and Personal Representative of the Prime Minister (Sherpa).  To support this role, the department announced in February 2017 the creation of the Summit Management Office (SMO) to lead the coordination of all logistics related to preparing, organizing and implementing the G7 Leaders’ Summit, ministerial meetings and other events related to G7 Presidency.

Incremental funding totalling $604.5M was approved in December 2017 by the Minister of Finance to be allocated to all federal partners for the G7 Presidency activities. Included in this amount is $99.9M to cover Global Affairs Canada’s expenditures. In addition, several departments and agencies allocated funding from their respective reference levels.

What was examined

The objective of the audit was to provide assurance that adequate processes were used by the SMO to successfully deliver its mandate for the 2018 G7 Presidency, in compliance with applicable Government of Canada and departmental policies and directives. The audit examined the processes and systems used by the SMO with respect to financial planning, contract and expenditure management and financial reporting and monitoring. The audit covered the period from April 1, 2017 to August 31, 2018, and therefore excluded activities that were planned from September 2018 onward. The audit team was informed that a written complaint had been submitted by a vendor to the Office of the Procurement Ombudsman with respect to a service contract awarded by the department prior to June 30, 2018. This contract was not included in the sample of contracts audited in this report (see more details on the audit scope and criteria in Appendix B). The audit also assessed the progress made in response to some observations and recommendations related to our audit scope that resulted from previous G8/G20 audits conducted by the department and the Office of the Auditor General of Canada.

What was found

The audit concludes that in general, adequate processes and systems were in place with respect to financial planning, contract and expenditure management, and financial reporting and monitoring of the G7

Presidency. The audit identified some opportunities for improvement with respect to contract and expenditure management, mainly with file documentation, contract amendments and timely payments of invoices. In addition, opportunities were identified to facilitate and strengthen the financial reporting and monitoring functions.

Finding 1

The audit team found that several practices were put in place to improve the financial planning, contract and expenditure management, and financial reporting and monitoring of G7 Presidency activities, resulting from the implementation of several observations and recommendations from past G8/G20 audits.

Finding 2

The audit team found that a process was defined, communicated and applied for the development, consolidation and review of the supplementary budgetary estimates and funding allocations between Global Affairs Canada and its partners. The audit team found that oversight committees, senior management and central agencies played a challenge role to ensure effective coordination over budget development. Co-locating key partners, committees and working groups facilitated the planning, coordination and delivery of the G7 Presidency activities. Federal partners being involved as members of various committees enabled the sharing of information, identification of cost-savings and efficiencies, and integration of operational plans.

Finding 3

The audit team found that an adequate process was established within the SMO Corporate Services Division to manage the contract and expenditure management functions. The test of a sample of contracts and expenditures revealed a high level of compliance with Government of Canada and departmental policies and directives, and the audit team found some opportunities for improvement, mainly with file documentation, contract amendments and timely payment of invoices.

Recommendations

1. The Assistant Deputy Minister responsible for the Summit Management Office should ensure that activities related to file documentation, management of contract amendments and payment of invoices are in conformance with applicable Government of Canada and departmental policies and directives.
2. The Assistant Deputy Minister responsible for the Summit Management Office should ensure that periodic financial reports include all funding provided, including Strategic Policy Branch and internal services’ budgetary estimates, actual expenditures and projections to assist in monitoring the overall departmental G7 Presidency budget.
3. The Assistant Deputy Minister responsible for the Summit Management Office should ensure federal partners to have their respective Chief Financial Officer attest the completeness and accuracy of their final financial information for consolidation and reporting of the G7 Presidency costs and funding.

Statement of Conformance

In my professional judgment as the Chief Audit Executive, this audit was conducted in conformance with the Institute of Internal Auditors' International Standards for the Professional Practice of Internal Auditing and with the Treasury Board Policy and Directive on Internal Audit, as supported by the results of the quality assurance and improvement program. Sufficient and appropriate audit procedures were conducted, and evidence gathered, to support the accuracy of the findings and conclusion in this report, and to provide an audit level of assurance. The findings and conclusion are based on a comparison of the conditions, as they existed at the time, against pre-established audit criteria that were agreed upon with management and are only applicable to the entity examined and for the scope and time period covered by the audit.

1. Background

The lead responsibility for planning, organizing and delivering the G7 Presidency rests with Global Affairs Canada, and it is under the leadership of the Deputy Minister for the G7 Summit and Personal Representative of the Prime Minister (Sherpa). To support this role, the department announced in February 2017 the creation of the Summit Management Office (SMO to lead the coordination of all logistics related to preparing, organizing and implementing the G7 Leaders’ Summit, ministerial meetings and other events related to G7 Presidency.

The SMO is jointly led by an Assistant Deputy Minister (ADM) and two Directors General (Planning and Programs) funded by Global Affairs Canada, and a Director General (Security) funded by the Royal Canadian Mounted Police. Several SMO and interdepartmental committees support the planning and coordination of the G7 Presidency activities. In addition, some Government-wide working groups were established to help achieve efficiencies in specific operational areas, such as procurement governance, accommodations and transportation.

Hosting the G7 Presidency requires the co-operation and involvement of 15 federal departments and agencies. Incremental funding totalling $604.5M was approved in December 2017 by the Minister of Finance to be allocated to all federal partners for the planning, organization and delivery of the G7 Presidency. This amount includes a contingency of $25M. Included in the approved incremental funding is $99.9M to cover Global Affairs Canada’s expenditures. In addition to the incremental funding, federal partners allocated funding from their respective reference levels.

2. Observations and recommendations

This section sets out key findings and observations, divided into three general themes addressing financial planning, contracting and expenditure management, and financial reporting and monitoring.

2.1 Financial Planning

Overall G7 Presidency Budget

The audit team expected to find that a process with respect to the development, consolidation and review of supplementary budgetary estimates and funding allocations between Global Affairs Canada and its partners would be defined, communicated and applied to support adequate financial planning and enable effective oversight.

The audit team found that a process was defined, communicated and applied for the development, consolidation and review of the supplementary budgetary estimates and funding allocations between Global Affairs Canada and its partners as further detailed below.

Development and Consolidation of Funding Requirements

The planning process started long before the announcement on May 27, 2017 by the Prime Minister that Canada would host the G7 Leaders’ Summit on June 8 and 9, 2018 at La Malbaie, Québec. An interdepartmental meeting took place on January 11, 2017 where a proposed organizational chart, preliminary assumptions and critical timeline were provided and discussed amongst federal partners. A process for the development of the budgetary estimates was agreed upon by the Finance Department and the Privy Council Office in April 2017, and it was communicated to departments and agencies.

Global Affairs Canada was responsible to issue a general funding letter that highlighted its funding requirements and funding request, as well as regrouped in an annex the additional funding requested by federal partners. Departments were asked to produce their own funding letter which included the agencies within their portfolio and refer to Global Affairs Canada’s overarching funding letter. The departmental funding letters were sent to the Prime Minister, with a copy to the Minister of Finance in June and July 2017. Each department had to submit a background document to provide their rationale, reasons as to why the incremental costs could not be funded internally, as well as a cost breakdown and an attestation from their Chief Financial Officer (CFO). All departments were requested to provide their final cost estimates to Global Affairs Canada for inclusion in the overarching funding letter and its annex.

In addition, the department was mandated to coordinate a consolidated funding request which included a more detailed breakdown of the departments’ requested funds and supporting information.  The consolidated funding request was sent by the SMO on November 29, 2017, prior to the Minister of Finance’s decision on the G7 incremental funding request. The consolidated funding request was signed by departmental Ministers and included federal partners’ CFO attestations and confirmation statements signed by their Deputy Minister.

Challenge Role of Oversight Bodies and Central Agencies

In the 2011 Spring Report of the Auditor General of Canada – Chapter 1 - Expenditures for the 2010 G8 and G20 Summits, the Auditor General indicated that processes for reviewing costs in business plans were not consistent. To address this matter, both an Ad Hoc Deputy Minister Committee and an Interdepartmental Director General Committee were established to implement best practices for cost-sharing and efficiencies, integrate security activities, enable an improved flow of information among federal partners, as well as provide for a more active challenge role, ensuring a better consolidation of information on funding requirements, allocations and spending.

In addition, the Department of Finance, the Privy Council Office and Treasury Board Secretariat all played a challenge function in the development of the 2018 G7 Presidency budgets by meeting federal partners to gain an overall understanding of the policy, security and logistical requirements of delivering the G7 Presidency, and requested explanations from departments and agencies on their requirements, as needed. Central agency analysts participated to separate workshops with logistics and security partners to review requirements and assumptions, and challenge partners to ensure that common activities were not duplicated in their respective funding letter requests.

Following the Minister of Finance’s decision on incremental funding to be allocated to the G7 Presidency, federal partners were requested to submit revised budgetary estimates prior to January 4, 2018, with total incremental funding of departments and agencies not exceeding $604.5M.

Global Affairs Canada G7 Presidency Budget Development

The audit team expected to find that the development of the SMO supplementary budgetary estimates and subsequent budget changes within the approved funding envelope would take into consideration the identification of requirements and supported assumptions, risk assessments, alignment with approved operational plans, and review by senior management and the CFO.

The audit team found that the development of Global Affairs Canada’s budgetary estimates
were based on assumptions that had been determined at the time and related operational plans. Financial risks were integrated into budget planning by considering scenarios that were most likely to occur. Budgetary estimates were reviewed by senior management for their relevancy and appropriateness, in addition to be challenged by the central agencies.
Funding Request

The audit team found that budgetary estimates presented in Global Affairs Canada’s funding letter and the consolidated request were developed by Directors who were in position at the time. Knowledge and expertise of those who participated to past summits facilitated the budget development.

A detailed process was developed to assist in determining salary and operating budgetary estimates of each division. Distinct fund centres associated with each division, as well as internal order numbers, were created to track G7 Presidency related costs. The fund centres aligned with those of past summits to produce comparative figures. Standard travel costs were developed to ensure all Directors determined their travel budget requirements based on the same standard costs. If one division was expected to cover expenditures of other divisions, all assumptions had to be written and confirmed by both parties. Salary budgets took into consideration the organizational chart, required positions, and factors such as estimated overtime, salary increases and retroactive pay.

Budgetary estimates were based on the assumptions and related operational plans, and they provided for unknown factors, scenarios and plans that had the most chances to materialize, taking into consideration all possible elements. A meeting with all Directors who were present at the time, the Director General, Planning and the Executive Director, Corporate Services took place during the budget development process to review the assumptions and to make sure all budget elements were considered and there was no duplication. The SMO Financial Services Unit played a challenge role to confirm that budgetary estimates aligned with standard costs, considered all assumptions, and did not include corporate services funded by that specific fund centre. In addition, budgetary estimates were challenged by the central agencies.

Approved Funding

Following the Minister of Finance’s decision on incremental funding, the SMO submitted revised budgetary estimates in January 2018. The interviews indicated that budgetary estimates were reviewed by the Director General, Planning and the Executive Director, Corporate Services.

The revised budgetary estimates were segregated into two sources of funding: new funding (incremental) and existing funding (reference level). Incremental funding approved by the Minister of Finance amounts to $99.9M, and it includes a frozen allotment for fiscal year 2018-2019. For internal purposes, the departmental budget is segregated into three components: SMO, Sherpa and PFM, with each component including a provision for internal services.

Revised Budgets and Projections

The audit team found that Global Affairs Canada’s budget planning and operations were impacted by the submission approval coming relatively late during the G7 planning process. At the time of approval, there were still operational decisions to be made, which delayed the contracting process on some key contracts or resulted in new contracting needs being identified. The planning phase of the G7 Presidency was therefore extended, and an important portion of the funding expected to be required for fiscal year 2017-2018 was not spent in that fiscal year. The department is currently awaiting a response from the Minister of Finance on its reprofiling request.

In both fiscal years 2017-2018 and 2018-2019, the department has allocated additional funds from its reference level to those presented in the revised budget submitted to Treasury Board in January 2018. Budget changes were reflected in the monthly financial reports prepared by the SMO Financial Services Unit and submitted for review and approval to members of the Finance and Reserve Management Committee created in September 2017. Based on most recent projections, management expects the department to be in a surplus position and not have to request access to the frozen allotment, assuming the reprofiling request will be approved by the Minister of Finance.

Communication of Key Changes

The audit team expected to find that key changes affecting requirements, assumptions, operational plans and their associated costs would be communicated on a timely basis to relevant stakeholders of the SMO and its partners to support adequate budget planning and monitoring within their respective approved funding envelopes.

The audit team found that key changes were communicated on a timely basis to relevant stakeholders to support adequate budget planning and monitoring. Co-location of key federal partners, SMO committees, inter-departmental committees and working groups, as well as daily meetings during the three months prior to the Summit provided a forum for consultation, analysis and information sharing, and facilitated the communication of key changes.

Furthermore, the audit team found that SMO Directors were involved in the completion of a risk assessment that helped ensure proper mitigating measures were in place. A critical path was also developed and updated monthly by each SMO Director, with a consolidated critical path being prepared and discussed at SMO meetings to assist in delivering the G7 Presidency activities on time.

Committees and Meetings

The audit team found that the SMO Executive Council, the SMO Branch Management Committee and the interdepartmental Operations Committee provided a forum where management issues and operations were discussed, and decisions and other relevant information were communicated. The Summits Management Office Executive Council focused on logistical and operational requirements. The Executive Council met twice a month during the period of August to October 2017 to discuss financial and operational matters, and it ceased its meetings when the Branch Management Committee and Operations Committee were set up.

The Branch Management Committee was established to discuss and review management issues, and to provide an open forum for information sharing and discussion. The Committee met at least twice monthly during the period from November 2017 to March 2018. The Operations Committee’s role was to coordinate operations, such as facilities installations, accommodation and transport, for optimizing logistic requirements and support efficiency. The committee met twice a month during the period from December 2017 to April 2018. A few months before the Summit event, both the Branch Management Committee and Operation Committee meetings were replaced with daily meetings of committee members. 

The audit team found that the Ad Hoc Deputy Minister Committee had regular discussions during the planning and delivery phases of the G7 Presidency activities. The Interdepartmental Director General Committee which was created in the Spring of 2017 met at least once monthly during the period from May 2017 to April 2018. Furthermore, the interviews indicated that daily communication took place between the SMO ADM and its counterparts.

Government-wide working groups were also established to help achieve efficiencies in specific operational areas, such as procurement governance, accommodations and transportation. Co-locating key partners, committees and working groups facilitated the planning, coordination and delivery of the G7 Presidency activities.

Risk Assessment

The SMO Directors were involved in the completion of a risk assessment to help ensure proper mitigating measures were in place to address risks to the G7 Presidency activities. Guidelines with respect to the risk assessment process were developed, and tools were presented to the Directors in December 2017. The risk assessment was conducted and documented in February 2018.

In addition to the above risk assessment exercise, the interviews revealed that risks were managed on an on-going basis by Directors and their respective teams. Management stated that a risk analysis was done at each event, and that requirements were re-evaluated during daily team meetings, with plans being amended as needed.

Critical Path

A G7 critical path was designed, maintained and distributed by the Chief of Staff and the Strategic Advisor to guide the planning and implementation of the G7 Presidency activities. It was meant to track strategic, specific and immediate tasks by division, as well as tasks that required the attention of all senior management to ensure the mandate of the SMO was delivered on time. 

The SMO Directors, as soon as they were assigned, were instructed to develop and maintain their own critical path of actions and timelines, and that as early as of April 2017. Those were rolled-up weekly into an integrated, but less detailed, SMO critical path representative of all divisions and stakeholders, which listed key activities and deliverables, dates and responsible sections, with their status and any comments.
The integrated critical path was distributed during the weekly SMO Branch Management Committee meetings to track progress, and it was updated after each meeting to provide Directors with reminders of required actions.

2.2 Contracting and Expenditure Management

Roles, Responsibilities and Processes

The audit team expected to find that roles, responsibilities and processes for SMO contracting and expenditure management would be defined and in place to support effective and compliant procurement and expenditure management functions.

The audit team found that the SMO had established and communicated a procurement and financial management framework, including defined roles, responsibilities and processes to mitigate procurement risks and help ensure compliance with Government of Canada and departmental policies and directives.

SMO Goods and Services Unit and Financial Services Unit

A centralized SMO Goods and Services Unit was established to provide direction and oversee the SMO procurement and contracting activities. Public Services and Procurement Canada (PSPC) was the contracting authority for contracts that fell under their responsibility in accordance with the Treasury Board Contracting Policy, and for those where their specific expertise was requested by the SMO.
Under the process in place, an assigned Goods and Services Unit Contracting Officer was responsible to review the requisition signed by delegated authority, identify the type of contract to be issued, and carry out a solicitation process as may be required. Contracts were signed by the relevant Goods and Services Unit or PSPC delegated authority, and a copy was sent to the SMO Financial Services Unit. The assigned Contracting Officer assisted the Delegated Authority with Section 34 certification, by confirming compliance of the invoiced amount with the contract terms and conditions and appropriate general ledger account, prior to the approved invoice being sent to the SMO Financial Services Unit.

Assigned SMO Financial Services Unit Financial Officers performed several verification tasks to ensure invoices complied with contractual terms and conditions, have been authorized, and were accurate and properly coded. They were responsible to ensure that funds had been committed and original invoices had been provided. An electronic version of the invoice was attached in the Procure to Pay Finance and Administration System, and a payment to supplier was created by the assigned Financial Officer. Section 33 account verification and issuance of payment were completed by the departmental Payment Services Division (SMFP).

Procurement Guidance and Tools

Contracting responsibility and procedural guidelines are detailed in the Guide on Procurement which is available on Global Affairs Canada intranet. The guide provides, amongst others, specific information with respect to the contracting process, from need identification to the payment of invoices.

Global Affairs Canada’s Delegation of Financial and Contractual Signing Authority Instruments details the authority that was delegated to SMO positions with respect to expenditure initiation, recording of commitments, contracting, certification and payment. No exceptional contracting authorities were obtained for G7 Presidency related goods and services purchases.

Processes were developed and documented for specific transactions and expenditure management activities. They were made available to personnel through the SMO common drive. They included delegation of authorities, funds reservations, commitments, accounts payable/invoices, use of acquisition cards, office supplies, shop@DFATD requests, interpreters and translation, taxi vouchers, travel letters, requests and specification form, hospitality expenses, preparation of expense reports and year-end accounting procedures.

The audit team noted that past recommendations from the January 2011 departmental Internal Audit report on the Audit of the G8/G20 Summit Management Office were implemented, including the creation of a document checklist to help ensure all critical documentation is in the procurement files and an additional question on the Request for Contract form to inquire if the proposed contractor is a former public servant in receipt of a pension or lump sum payment.

Inter-Departmental Procurement Governance Committee

An Inter-Departmental Procurement Governance Committee was set up to regroup the acquisition needs for goods and services for the federal partners, identify the most efficient means for acquisition, and facilitate procurement needs for federal partners seeking identical goods or services in the same region. The Procurement Governance Committee met on a bi-weekly basis during the period from September 2017 to March 2018.

The Inter-Departmental Procurement Governance Committee intended to provide a forum for consultation, analysis, exchange of information and clear communication between the SMO, partners and other stakeholders with respect to the contract award and management. It served to facilitate the identification of areas where a combined contracting and procurement strategy could provide efficiencies and overall cost savings for the Government of Canada. It also acted as a support to the various working groups within the G7 organization.

The audit team was informed that a list of critical contracts or contracts to be awarded through electronic bidding was submitted to the SMO ADM for review and subsequently shared with the Prime Minister’s office for information purposes. The audit team was advised that all requests for proposals were examined by the Goods and Services Unit’s Manager, and in some cases, the Deputy Director participated to the review and examined the procurement strategy.
For the above reasons, the Departmental Contract Review Board was not asked to review contracts with a requirement (original or amended) exceeding $200,000 including taxes, or higher risk contracts as prescribed in Global Affairs Canada’s Guide on Procurement.
Ex-Gratia Payments

The budgetary estimates include a provision for ex-gratia payments. The deadline for claim submission is September 15, 2018. As of August 31, 2018, 60 requests for ex-gratia payments were active and in total, they were below the estimated budget. Some ex-gratia payment requests were reviewed internally, and others were examined by an external firm contracted to assist with the review process. 

Compliance with Applicable Government of Canada and Departmental Policies and Directives

The audit team expected to find that SMO contract and expenditure management practices would comply with Government and departmental policies and directives. The audit team performed a test of a sample of 35 contracts and 14 other types of expenditures for goods and services to confirm compliance with applicable Government of Canada and departmental policies and directives. Criteria that were examined related to bidding and selection, contract awards, contract administration and expenditure management. Although the test of a sample of contracts and expenditures revealed a high level of compliance with Government of Canada and departmental policies and directives, the audit team identified some areas for improvement, mainly with file documentation, contract amendments and timely payment of invoices.

With respect to file documentation, the audit team found four contracts for which the procurement files did not provide a complete audit trail with all relevant communications and decisions. For example, in one instance, a competitive process was undertaken by contacting vendors over the phone or through email, and there was missing documentation on file, such as all responses provided by vendors and names of contact persons. In another case, a difference between the quote and the contract amount was not documented in the contract file. 

With respect to contract amendments, the audit team found three contracts where services were rendered prior to the contract or amendment being signed. In addition, for one of those contracts, paid invoices exceeded the contract value recorded in the application SAP by approximately $22K, and that was prior to an amendment being issued. Issuing a payment exceeding the contract value is not consistent with the Financial Administration Act.

The audit team also noted that one contract was amended by 144% of its original value approximately four months after the contract end date and the final invoice had been received and paid. Although the final payment was issued, the contract was not closed in the application system SAP, allowing it to be amended. Management explained that when there are no funds left under a contract, they do not always close the contract in the system. Another procurement process should have been undertaken rather than an amendment being issued.

The audit team found that nine contracts had invoices recorded in the application system SAP as of June 30, 2018 that were not paid within 30 days of being received. Timing varied from 31 days to 89 days after the invoice receipt date, and some invoices received prior to July 31, 2018 with respect to two contracts remained unpaid as of August 31, 2018. Management explained that several factors caused untimely payment of invoices, including discussions with suppliers on invoiced amounts, high level of invoices after the end of the Summit and summer vacations. The audit team was informed by management that no interest had to be paid on those late payments.

The audit team also verified if all 32 sample contracts over $10,000 were disclosed as required by the TBS Guidelines on Proactive Disclosure and found that only one contract with a value of $89,496 had not been disclosed. Further review indicated that the exclusion of this contract was due to a technical problem that affected all of the Departments as SAP users who were using the Government of Canada’s Core Footprint reports to run their Proactive Disclosure reports. The audit team was informed that this issue has been submitted to the system team at Public Works and Government Services Canada for future solution and this contract was expected to be disclosed in Q4, 2018-2019 report.

Recommendation

1. The Assistant Deputy Minister responsible for the SMO should ensure that activities related to file documentation, management of contract amendments and payment of invoices are in conformance with applicable Government of Canada and departmental policies and directives.

2.3 Financial reporting and monitoring

Global Affairs Canada G7 Presidency Costs

The audit team expected to find that timely and accurate financial information would be maintained and reported, and that senior management would provide adequate oversight and monitor the financial management performance of their respective areas of responsibility to help ensure accurate and complete reporting.

As further discussed below, the audit team found that timely financial information was maintained and reported to the Finance and Reserve Management Committee to assist them in their financial oversight role. For internal purposes, the departmental budget was segregated into three components: SMO, Sherpa and PFM, with each component including a provision for internal services. The audit team found that except for the year-end report, financial reporting submitted to members of the SMO Finance and Reserve Management Committee was limited to the SMO and Sherpa components, with no information on PFM and internal services.

Specific fund centres were created that allow for tracking the SMO, Sherpa and PFM costs. Corporate Finance was also provided with internal order numbers for the identification of internal services directly related to the G7 Presidency.

Monitoring by the Finance and Reserve Management Committee

Financial reports, travel reports, as well as salary and overtime reports were maintained and provided to members of the Finance and Reserve Management Committee on a timely basis to assist them in their oversight role. The reports were issued monthly except for the first three periods of the fiscal year where no financial status reports (FINSTAT) were required as per departmental guidelines. A year-end final financial report was also submitted to committee members.

The financial reports present useful fund centre information for monitoring purposes, including budgetary related data, actual expenditures, surplus (deficit), projections, burn rates as well as explanations of variances and transfers between budget lines. However, the information in the financial reports received by the committee is limited to only the SMO and Sherpa components of the departmental budget, except for the year-end report which included PFM and internal services budgetary estimates and actual expenditures. As a result, the committee is not provided with all necessary information to timely identify any surplus (deficit) with respect to other components of the departmental budget.

Recommendation

1. The Assistant Deputy Minister responsible for the SMO should ensure that periodic financial reports include all funding provided, including PFM and internal services’ budgetary estimates, actual expenditures and projections to assist in monitoring the overall departmental G7 Presidency budget.

Monitoring by Directors

Monthly meetings took place between the SMO Financial Services Unit and the Directors to review their fund centre forecast, expenditure and commitment information which was used in the preparation of financial reports. The SMO Financial Services Unit maintained a spreadsheet for each fund centre with explanations of key variances between the projections and the funding letter request. As part of the monthly review process, the SMO Financial Services Unit also ensured that the most recent version of the organizational chart matched with the salary reports, which was useful in their challenge role when Directors provided their salary forecasts. The overall SMO financial reports, travel reports and salary and overtime reports were submitted to members of the Finance and Reserve Management Committee. Although these reports were not systemically shared with Directors, they were available for their respective fund centre upon request.

The system application SAP enables Directors to monitor their contracts, invoiced amounts, actual expenditures and budget for their respective fund centres. Some Directors developed control sheets that allowed, amongst others, for tracking spending, identifying what has been paid and is to be paid, as well as analyzing and monitoring expenditures. Other monitoring activities performed by the Directors included approving expenditures and invoices through Section 32 and 34 certifications, as well as reviewing their organizational chart and approval of overtime.

Consolidation of G7 Presidency Costs

The audit team expected to find that a process for reporting would be established for federal partners to report on actual expenditures and approved funding of the G7 Presidency to better inform Parliament, as recommended in the 2011 Spring Report of the Auditor General of Canada – Chapter 1 - Expenditures for the 2010 G8 and G20 Summits.

The audit team found that the SMO Financial Services Unit has established a process under which federal partners are required to report relevant financial information on their actual expenditures, estimated spending and budgets, which is reviewed and consolidated by the SMO for future reporting of G7 Presidency funding and costs. The process became effective in February 2018 when federal partners were requested to complete financial information for the month of January 2018.

The SMO developed a reporting template which was provided to partners with a set of instructions to help ensure reporting consistency. Although the department has no role in certifying the data submitted by federal partners, they were recently reminded by the SMO to provide a realistic preliminary appreciation of their financial situation as the latest submitted information did not appear up-to-date. They were also advised that the Deputy Minister was planning a meeting with federal partner counterparts to discuss the overall financial situation.

The audit team found that the Deputy CFOs have been requested to sign-off the reporting tables, and the CFOs are expected to submit an attestation with their final financial information as indicated in the Guide to Departments on the Management and Reporting of Horizontal Initiatives.

Recommendation

1. The Assistant Deputy Minister responsible for the SMO should ensure federal partners to have their respective CFOs attest the completeness and accuracy of their final financial information for consolidation and reporting of G7 Presidency funding and costs.

3. Conclusion

The audit concludes that in general, adequate processes and systems were in place with respect to financial planning, contract and expenditure management, and financial reporting and monitoring of the G7 Presidency. The audit identified some opportunities for improvement with respect to contract and expenditure management, mainly with file documentation, contract amendments and timely payment of invoices. In addition, opportunities were identified to facilitate and strengthen the financial reporting and monitoring functions.

Appendix A: Federal partners

1. Global Affairs Canada
2. Public Services and Procurement Canada
3. Health Canada
4. Finance Canada
5. Public Safety and Emergency Preparedness
6. Royal Canadian Mounted Police
7. Canadian Security Intelligence Service
8. Canadian Border Services Agency
9. Canadian Food Inspection Agency
10. Public Health Agency of Canada
11. Department of National Defence and Canadian Armed Forces
12. Innovation, Science and Economic Development
13. Transport Canada
14. Canadian Air Transport Security Authority
15. Shared Services Canada

Appendix B: About the Audit

Objective

The objective of the audit was to provide assurance that adequate processes were used by the SMO to successfully deliver its mandate for the 2018 G7 Presidency, in compliance with applicable Government of Canada and departmental policies and directives.

Scope

The audit examined the processes and systems used by the SMO with respect to the financial planning, contracting and expenditure management and financial reporting and monitoring of the G7 Presidency. The audit covered the period from April 1, 2017 to August 31, 2018, and therefore excluded activities that were planned from September 2018 onward.

Our test of a sample of contracts and expenditures for goods and services covered the period from April 1, 2017 to June 30, 2018, and it was limited to those contracts and expenditures recorded in the application system SAP as of June 30, 2018. Following the completion of the audit, the audit team was informed that a written complaint had been submitted by a vendor to the Office of the Procurement Ombudsman with respect to a service contract awarded by the department prior to June 30, 2018. This contract was not included in the sample of contracts and expenditures for goods and services that were examined.

Payments of amounts invoiced as of June 30, 2018 as per the application system SAP were examined. The audit also assessed the progress made in response to recommendations from previous audits that relate to our audit scope.

The following areas were excluded from the audit scope:

• the effectiveness of the Summit activities
• the merit of goods and services that summit planners identified as necessary
• the operations of Global Affairs Canada’s partner departments and agencies
• the ex-gratia requests made by businesses, organizations and individuals affected by the Summit

Criteria
 
The criteria were developed following the completion of the detailed risk assessment and considered the Audit Criteria related to the Management Accountability Framework developed by the office of Comptroller General of the Treasury Board Secretariat. The audit criteria were discussed and agreed upon with the auditees. The detailed criteria are presented as follows.

Approach and Methodology

In order to conclude on the above criteria, and based on identified and assessed key risks and internal controls associated with the related business processes, the audit methodology included, but was not limited to the following:

• identify and review relevant regulations, policies, and directives
• review and analyze relevant documents related to SMO operations
• review previous audits of the 2010 G8 and G20 Summits
• gain an understanding of relevant processes and systems, as well as identify key risks and controls
• interview key departmental officials
• perform data analysis on contracts
• perform analysis of related financial and non-financial information
• perform a test of a sample of contracts and expenditures for goods and services to confirm compliance with applicable Government of Canada and departmental policies and directives
• apply other relevant methods as deemed necessary by the audit team

The approach for the selection of contracts and expenditures was based on a combination of risk-based and random sampling. The sample included 35 contracts with a total value of $12.8M including amendments, and related invoiced amounts totalling $6.7M as of June 30, 2018 as per the application SAP. The sample also included 14 other types of expenditures, such as travel and other government department expenditures, with a total payment value of $3.9M as of June 30, 2018. 

Appendix C: Management Action Plan